Fortunerock raises $24M for its new subsidiary, IPO

HONG KONG – A Chinese protein drug developer received a $24 million investment to prepare a new subsidiary and pave the way for an initial public offering (IPO).

Privately held Fortunerock (China) Ltd. is the parent company of Tianjin Sinobiotech Ltd., Sinobiotech (Tianjin) Ltd. and Beijing Bio-fortune Ltd. All three are drug development companies.

Fortunerock said Aug. 25 it had raised $24 million for a spin-off company and to move toward an IPO this year. Fortunerock China will become a joint-stock company by the end of August.

"This is just the first round," Yu Zailin, chairman of Fortunerock, told BioWorld Today. "The second round fundraising will start about a year from now."

The new spin-off will take over the drug development of Tianjin Sinobiotech's lead asset, a recombinant human serum albumin (rHAS) and granulocyte stimulating factor (GCSF) fusion protein for injection. It is a novel protein drug used to stimulate cell proliferation, especially blood cells. The drug is aimed at patients with leukopenia caused by chemotherapy.

The rHAS-GCSF fusion protein injection is undergoing phase II trials. The company aims to use its albumin-fusion technology to help patients lower the injection frequency from daily to once every two weeks.

About $20 million from the first round will go toward that spin-off, which Yu will chair.

"The drug development job will be given to the spin-off company, but the research staff arrangements will not change at all," Yu said. "The Tianjin government has also been very supportive throughout this novel drug development."

The new company will be based near Tianjin Sinobiotech in the hi-tech development zone of Binhai New Area, in Tianjin.

"The money raised this time will probably run out within a year and a half for the construction of the new facility," Yu said. "We'll have to raise another round of funds to support the following commercialization part of the drug."

He added that half of the $20 million investment is already in place for the construction of the facility and devices purchase.

"The reason we have this spin-off is that some of the investors want to invest in the company as a whole but others want to invest in a particular product," Yu explained. "We'll assign the new company with this albumin product, so investors can directly invest in this new company."

Fortunerock said it has investment coming from both foreign and domestic investors.

"The 'foreign investor' here refers to our counterpart in the U.S., Fortunerock Inc.; it's an internal investment," Yu said. "Getting other foreign investments takes a long time. We talked to some U.S. investors, but they'll have to wait for the second round fundraising."

Another $2.4 million is coming from traditional Chinese medicine maker Nantong Jinghua Pharmaceutical Ltd. Co., and $1.6 million from two other Chinese enterprises and two individual investors. Those funds will be used to prepare Fortunerock's IPO.

"Hopefully, Fortunerock will be listed in the new third board in China by the end of this year," Yu said. "We'll start from the new third board, and maybe consider going to Hong Kong, Taiwan or the U.S. market in the future."

Jinghua and Fortunerock have agreed that in return for the cash investment, Jinghua will receive 13 percent of Fortunerock's shares. Also, under the terms of the agreement, Jinghua will have a 10 percent discount for Sinobiotech's rHAS-GCSF fusion protein drug, HAS and glucagon-like peptide fusion protein drug if Fortunerock ever decides to transfer those assets. And if Sinobiotech doesn't wish to industrialize the two assets, Jinghua will have the priority among other companies to do so.

Yu said he sees great potential in China's protein drug market, which he valued at around ¥50 billion (US$8 billion) per year.

The three subsidiaries of Fortunerock all are focused on the development, manufacture and commercialization of protein drugs. Fortunerock currently has three major drug candidates under development for indications such as hepatitis B and type 2 diabetes – one in phase I, one in phase II and another one waiting to enter phase I studies.

In mid-2013, Fortunerock sold the nonexclusive U.S. rights to the rHAS-GCSF fusion protein technology to Jerusalem-based Teva Pharmaceutical Industries Ltd.